Clinical Redesign: Engaging Physicians in Co- Leading Financial Improvement Andrew Agwunobi,MD,MBA Opinions expressed are those of the individual author(s) and do not represent the opinions of BRG or its other employees and affiliates .
Dr. Andrew Agwunobi Dr. Andrew Agwunobi is a leader of Berkeley Research Group’s Hopsital Performance Improvement practice. Before joining BRG, Dr. Agwunobi served as Chief Executive of Providence Healthcare, a five-hospital region of Providence Health & Services in Spokane, Washington. 2
Hospitals Are Making Financial Progress…But Aggregate Total Hospital Margins, (1) Operating Margins (2) and Patient Margins, (3) 1992 – 2012 8% Total Margin 6% 4% Operating Margin 2% 0% Patient Margin -2% -4% -6% 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 “…the average operating margin in 2013 was 3.1%, down from 3.6% in 2012 based on data available for 179 health systems, …A total of 61.3% of organizations in Modern 2013 Healthcare's analysis saw their operating margins deteriorate over the previous year. Source quote : “Fewer hospitals have positive margins as they face financial squeeze By Beth Kutscher Modern Healthcare http://www.modernhealthcare.com/article/20140621/MAGAZINE/306219968 Posted: June 21, 2014 3 Source Graph : American Hospital Association Trendwatch Chartbook 2014, http://www.aha.org/research/reports/tw/chartbook/ch4.shtml
Many Are Still Struggling Chart 4.1: Percentage of Hospitals with Negative Total and Operating Margins, 1995 – 2012 Negative Operating Margin Negative Total Margin Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2012, for community hospitals, and 4 *DefinitiveHC database. .
…and The Next Few Years Wont Be Easier “Even the strongest hospitals and health systems are, at best, only likely to hold existing margin and reserve levels, (assuming investment market growth) while weaker providers will likely see ongoing operating margin and cash flow erosion and eventually balance sheet pressure leading to rating deterioration which has already materialized and will continue in 2015 .” Martin Arrick Managing Director Standard & Poors
Financial Pressures will Continue • Weaker revenue environment – Still related to the economy with high levels of unemployment and underemployment, reduced health insurance benefits (high – deductible plans) – Medicare: sequestration, HAC penalties, re-admit penalties – Commercial plans offering smaller rate increases, seeking value based contracts • Heightened competition for (in)patients; utilization trends remain generally weak • Increased spending on information technology and physician employment – Cost of employing physicians without commensurate rise in volumes • Many of the ‘easier’ cost cutting tactics already deployed • Capital pressures building; must shift to an ambulatory strategy • Pace of ‘reform’ highly variable Source: Martin Arrick Managing Director Standard & Poor’s
U.S. Not-For-Profit Acute Health Care Rating Actions 2014 600 500 400 300 200 100 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Affirmation Downgrades Upgrades Data as of December 31, 2014 Source: Standard & Poor’s
Sample Hospital: “Reaching Beyond the Low Hanging Fruit- Finding the Next 20%” Traditional Clinical Redesign Elective volume declines 29% 29% Payer mix worsens 11% 36M 13% 20% Continued IP shift to OP 71% 27% Heightened Competition Operations, IT, MD hiring Clinical Variation Labor Non Historical New HR Revenue Models of Care Labor margins margins Cycle Physician Practices LOS/Throughput Source: BRG analyses and experience
What is Clinical Redesign? Clinical Redesign comprises innovative efforts to reduce inpatient and outpatient clinical costs using a physician co-designed and co- implemented model that: • Sustainably improves health system margins • Protects or enhances quality outcomes • Harnesses and aligns physician participation • Promotes physician integration within the organization • Reduces the clinical cost structure and cost per case thus enhancing ability to bear risk 9
Examples of Clinical Redesign: 1) Clinical Variation Reduction APR-DRG 174 & 175 – Percutaneous Cardiovascular Interventions with & without AMI Analyzed inpatient stent procedures with an MS-DRG of 246 – 249 (PCI procedure with DES or non-DES stent) Variation identified in the following areas: • Number of stents used per case • DES v. BMS usage ratio • IVUS catheter utilization • Antiplatelet therapies High cost Cardiology group reduced costs by more than $1M in 9 months • Length of stay Outcome: Interventionalists held monthly meetings to discuss evidence based guidelines for the identified drivers of variation as well as all discuss all cases where 2+ stents were placed. Resulted in $1.02M reduction in costs over 9 months. 10
Examples of Clinical Redesign: 2) Models of Care 650 Bed tertiary hospital 470 Bed community hospital Action: extends hospitalist service to Action: redesign intensive care unit health system-owned Skilled Nursing model including MD staffing, acuity of Facility (SNF) patients managed without intensivist consult, palliative care screenings, multi-disciplinary clinical delivery, and virtual stepdown Outcome: reduces SNF related ED Outcome: Despite volumes increasing visits by 30% and CMI remaining stable, the unit specific ALOS dropped from 3.7 to 2.5 Effort co- Effort co-leadership by leadership by intensivists, surgeons, hospitalists hospitalists 11
3 ) Clinical Variation Reduction APR-DRG 221 – Major Small & Large Bowel Procedures 5 procedures analyzed for opportunity: 1. Lap Hemicolectomy 2. Open Hemicoletcomy 3. Lap Sigmoidectomy 4. Open Sigmoidectomy 5. Partial Small Bowel Resection Identified: • Variation in potentially preventable complications • Overutilization of ICU, routine CXRs, and TPN • Opportunity to reduce ALOS. Outcome: Surgeons decided to adopt evidence based practice pathways for these 5 Procedures-Total $ opportunity identified $631,000. Effort co-leadership by 12 7 surgeons
Without Physician Engagement Clinical Redesign Just Doesn’t Work 13
Getting Serious- Physician Leadership is Essential to Redesign “More than half of practicing U.S. physicians are now employed by hospitals or integrated delivery systems” - NEJM 2011 (1) 1) Source: “Hospitals ' Race to Employ Physicians — The Logic behind a Money- Losing Proposition” (NEJM) Robert Kocher, M.D., and Nikhil R. Sahni, B.S. N Engl J Med 2011; 364:1790-1793May 12, 2011DOI: 10.1056/NEJMp1101959
Employed or Independent – The Trend Physician Practices has Surpassed Physician Ownership. 80% Medical Practice Ownership Type as a % of Total 70% 60% 50% Medical Practice 40% 30% 20% 10% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 Physician-Owned Hospital-Owned » In 2010, MGMA found that the share of hospital-owned practices reached 68% vs. 30% in 2004. Source: MGMA Physician Compensation and Production Survey Report ; Organization Ownership 2011 based on 2010 data; Wall Street Journal, “Shingle Fades as More Doctors Go To Work for Hospitals,” November 8, 2010 Page 15
Key Misalignment Themes Physicians Executives Data-based decision making/want all Data less timely, or detailed relevant information Reticent to share all information/decision Lack of business training/decision making making authority Lack of clinical training Skepticism about hospital’s agenda/blame Skepticism about Doc’s agenda hospital for problems Want docs to play with the hospital team Culture of independence and autonomy Blame docs for problems Patient care pre-eminent regardless of No Margin no mission margin Financial rewards for performance Lack of shared financial incentives Source: BRG’s observations and experience
Six Steps for Engaging Physicians in Cost Improvement 17
Step 1: Define the Need Why should the Physicians Care? And Why Should They Participate? Results/Outcomes Effective navigation Launching Vision Burning platform 18
Creating and Articulating a Compelling Vision • Clarity • Patient-centric Key • Simple Elements • Actionable • Effort will ensure Better “All children • Effort will allow admitted to for capital and hospital in • “Effort will benefit operational Atlanta will have children in improvements” the same level Atlanta” of care- that of a top 10 childrens hospital.” Uninspiring “Higher Order” If you stumble at this step you will loose physicians therefore: • Be transparent about the challenges • Seek Physician leadership input into the vision • Seek physician leadership input into the communication plan
Step 2:Share Clinical Cost Data and Let the MDs Help You Interpret It. Collect Detailed Clinical Cost Data and APR DRG 174 & 175 – PCI w & w/o AMI • Share it with the MDs. LOS by APR-DRG Data and Share it with the MDs. • LOS by MD • Benchmarking data (comparable/internal Stent Usage per Case by Physician • Cost per case by physician • Breakdown of costs into categories • Margin analysis • Linkage to overall financial improvement LOS by Physician 20
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